Harvard University, with Yale and Princeton, was among the first U.S. institutions to invest heavily in venture capital. Commercial real estate. Hedge funds. The Pennsylvania State Employees' Retirement System and other aggressive investors followed. The University of Pennsylvania and other stock-and-bond shops worried they'd missed the party.

But now poor Harvard is saddled with illiquid assets, budget cuts and a big financial hangover from depending too much on its wonder-working millionaire fund managers, many of whom have left.

In "Harvard Has a Cold," lead article in the first issue of PlanSponsor founder Charles Ruffel's new online magazine, www.ai5000.com, writer Kristopher McDaniel reports Harvard's had such a hard time turning its unwanted positions into the cash it counts on to support annual operations that it's "preparing a large bond offering" to borrow money. That's "indicative of a cash shortfall which impacts the university, the endowment and other Harvard entities."

"Yale plans for its endowment to support 44 percent of the university's budget this fiscal year. Harvard depended on the endowment for about 35 percent of its revenue during the fiscal year ended June 30," Bloomberg reports here.  By contrast, Penn derives just 9% of its operating budget from its endowment, according to spokeswoman Lori Doyle.

Harvard and Yale "may have to cut investments in hedge funds and private equity because the risks of holding the hard-to-sell assets outweigh the returns," Bill Gross, co-chief investment officer of Pacific Investment Management Co., tells Morningstar Inc.'s fund conference in Chicago, according to Bloomberg. "The Yale and Harvard portfolios, which have succeeded enormously over the past 10 or 20 years in terms of the emphasis on illiquidity and private investments and risk-taking -- you have to question that model."